Experience From The Plastics Industry – A CEO’s Perspective

There’s no shortcut to learning how to negotiate well. Some are apt to it, but for most of us, learning the art of negotiation comes from making a series of painful mistakes. This was my path during my years in the plastics industry. I learned a lot about what to do, but more importantly, what not to do when negotiating. Over time, I was able to negotiate some jaw dropping deals for our business, and save the company a lot of money during lean times.

Today’s economy reminds me of those days and I thought it would be a good time to share the best of the lessons I’ve learned. Today, I’m going to outline seven of the many keys to negotiating with your vendors. Follow the blog to find out seven more next week. Follow these steps closely and you’ll begin to see results quickly.

Know exactly what you want before you enter your negotiation. Having this information prepared before you begin negotiations is invaluable. When we were looking for a machine to grind up some tough plastic, I knew exactly what needed to be processed, and what the throughput had to be. This allowed me to know exactly what I needed before the negotiation. Often, when a vendor felt he wasn’t quite meeting our needs, he was willing to bend a little further in our favour in other areas of the negotiation.

Give your vendor enough time to find you a discount. Knowing when you need the product or service gives you a natural advantage. Giving lots of lead time to vendors allows them to consolidate orders and get further discounts from their suppliers that they can pass on to you.

Identify 3 vendors offering the same product if you want a specific brand, or if brand is not important, look at 3 separate manufacturers of similar products. Your goal is to create the feeling of a competition, kind of like like having a blind auction. When your vendors knows their up against competitors, it’ll keep them on their toes. We were sole-sourced on a lot of important items at first and had no buying clout as a result. Knowing the names of the manufacturers, suppliers and particularly the name of their sales reps was extremely useful. People were more receptive to negotiate when we dropped names: “I was speaking to Jim at ACME Co. about their model 327…”. Our suppliers knew we’d done our homework and were more willing to sharpen their pencils. Have the list prices and specifications at the ready and be sure you know how much money you’re prepared to spend – but don’t give this information out.

Be sure to know the best deal you ever got. If you’ve purchased a product or service before, look up your last price and your best price ever. That great deal you got 6 months ago when the sales rep was desperate to meet quota is a good indicator of how low they are willing to go.

Know how much money you’ll spend with them in the long-run. If this will be a repeat buy, have some idea of how much repeatable annual business is available to the supplier. For a sales rep, the first sale is always the hardest, and what they’re really looking for is easy repeat business. Most sales reps will ask how much annual business is available for them. The more business you can funnel their way, the better the deal you can negotiate. If your purchase is regular then they can build this into their sales projections, which makes them even happier. Bottom line: they should be trying hard to get that first order.

Indicate that funding is available and you’re able to make the purchase. Vendors don’t like spending a lot of time and effort preparing a quote that’s only for budgeting purposes. Indicate you have the authority to make the purchase. This way, you’ll have their full attention, and readiness to work hard on the quote.

Let them know that your company likes to deal with one vendor. Impress on them that you would like them to get the business, but they need to get their foot in the door first. Let them know you’ll be getting or already have other quotes from other vendors.

There’s a lot to negotiation, many mistakes to be made, and more points than I’d like to include in this post. Stay tuned for more points that will help hone your negotiation skills.

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